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Sometimes it's difficult to imagine the significant impact inflation will have on our budget because of the slow and steady pace of price increases. But any retiree can tell you that inflation is one of the most significant financial obstacles to living a comfortable life. After all, a meager 2 percent annual inflation rate since 2000 would mean a 27 percent increase by now. If inflation were just one percentage more at 3 percent, then the increase in prices would be 43 percent.

Here are a few ways retirees can mitigate the impact of inflation on their budget:

Buy a home. There are many reasons to rent in retirement, but one of the advantages of home ownership is that you can hedge against inflation by getting a fixed mortgage, fixing your monthly payment for decades. This is also one of the reasons why over the long term, the average homeowner usually comes out ahead financially, as no one can legally and continuously raise your rent.

Find lower-cost alternatives to replace what you enjoy. It's true that inflation makes the same item cost more, but you can still slash your budget by using alternatives that are less costly. In order to not feel deprived, look for replacements that are truly similar to what you currently enjoy. For example, most people will find that generic drugs provide the same benefit as the brand name equivalent at a fraction of the cost. Similarly, you may find that signing up for a Netflix (NFLX) free trial can ultimately replace your cable TV subscription. Have an open mind, and the benefits will surprise you.

Skip some expenses regularly. Inflation will affect your budget less as an absolute dollar amount if your overall expenses are lower. Once in a while, try to skip your expenses. You may find that you really need a cable TV subscription during football season, but you may not need to keep paying for it during the off-season. By stopping the TV bills for a few months, you may even be able to qualify as a new customer again and take advantage of promotional offers such as the one Verizon (VZ) issues for its FiOS service. And if months at a time seems like too little TV time, then at least cancel your subscription during long vacations. You won't be watching TV while you are relaxing in the Caribbean Islands anyway.

Limit lifestyle inflation. There are many expenses that creep up as time goes on, but there are often other expenses, such as electronics costs, that go down over time as well. A major source of inflation is actually self-induced via lifestyle inflation. Instead of driving a beater, we want a decent car and eventually a luxury SUV. Instead of landlines, we now need a cell phone and eventually a smartphone. We shouldn't always deprive ourselves in the name of the future, but don't go overboard either because that's the most direct route to poverty in old age.

Buy stocks of companies that make more when you have to pay more. One way to at least take part in price increases is to invest in companies that benefit when they charge you more. Proctor and Gamble (PG), for instance, is a company that will make more money when the products they sell cost more on the shelves. Oil companies are another example. You won't get back every dollar increase that you have to pay out, but you can share a portion of the price hike that everyone else has to pay.

Inflation may not feel like much when you are working, but it can have a significant impact on the buying power of your retirement savings. These adjustments can help you to minimize inflation's bite.

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r.powel46

My parents have recently taken out a reverse mortgage-At first I thought it was a horrible idea since we have had the home in our family now for many generations but after speaking to my lender they explained that my parents home be mine as long as I can pay off anything that the borrow. Im calculating that the home appreciation alone should cover over the interest costs so it is essentially a free loan for them - I'm glad that they now have more money for their retirement.

It is better if you save money by keeping your overhead low. But investing in stocks? It is another form of gambling and I wont do it. Try eating at home for less and it is much more healthy, avoid the super expensive cars etc etc. You can enjoy life more if you have a lot of money rather than a lot of things.

WHY IS IT THE HIGHER PEOPLE ARE EDGECATED THE DUMMER THEY GET ON EVERY DAY LIFE.HOW MANY PEOPLE THAT DROPED OUT OF SCHOOL IN GRADE SCHOOL VERSE COLLAGE PEOPLE THAT ARE ON THE STREET HOMELESS.WE ARE BECOMEING A NATION OF HIGH EDGECATED ASS HOLES.GO T COLLAGE LOSE YOUR COMMON SENCE

Check the math. 2% FROM 2000 to now would be only 24%. Including 2000 would still be less than 27%. 3 X 12 is 36 and 3 X 13 is 39. Where is the 43% come from. You must hit 100% gain over the years before the percentage can self increase.Buying a home may fix the morgage payment but it will not stop the tax increases from the schools, counties and towns which often increase every few years to also keep pace with inflation. When all is said and done these increases often add up to 3 times the inflation where as the landlord usually only increases every few years to keep pace with inflation.

You need to study compound interest math to understand inflation. Just as a 3% cost of living increase every year amounts to more than 3% yearly over time due to the fact the 3% added to your original amount becomes the starting point for the next 3%. It actually becomes 3% plus a little due to the 3% being added to a larger number each time.Someone else could probably explain this a little better; I'm just a retired electrical inspector.

Joe,1st learn what compound interest is (8th grade math and most calculators have the button). Second, a landlord passes on every increases in any expense he occurs to the tenants and then some (I know, I own many). Insurance, loans and maintence are all higfher on a reantal vs. owner occupied, and in many areas even the property tax is much higher (in my stste it is 40% more for a rental). ALL these higher costs are passed onto the tennants.